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Financial Reporting Practices and Internal Controls in Churches
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The financial costs of fraudulent activities are significant because of the widespread implications for business organizations. Current literature reveals misrepresentation of financial statements has resulted in significant penalties and fines affecting the profitability of the organization. Based on the Association of Certified Fraud Examiners the current estimate of financial irregularities suggests a significant amount of revenue is lost because of fraud. The issue of financial accountability is not confined to for-profit entities but is also applicable to not-for-profit organizations such as churches. The news of fraudulent activities and scandals in religious institutions has increased the need for effective accounting standards and practices in churches. Not-for-profit organizations are not mandated under federal laws for financial reporting hence churches have been utilizing undesirable accounting practices over the past decade. Research on the financial affairs of churches is limited because of a lack of federal mandates of churches. Research has shown the need for more financial accountability among churches.
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